ENERGY

Peabody Energy still looking at Australian, Mongolian opportunities

Recently rebuffed in its attempts to buy Macarthur Coal, the coal miner says it is undeterred and remains optimistic of opportunities in Australia and Mongolia

Author: Steve James (Reuters)
Posted: Friday , 25 Jun 2010

NEW YORK (Reuters)  - 

Coal miner Peabody Energy (BTU.N), rebuffed in a recent acquisition bid in Australia, still wants to expand Down Under to meet Asian demand and is also pursuing opportunities in Mongolia, Chief Executive Officer Gregory Boyce said on Thursday.

"We're still optimistic," he told Reuters on the sidelines of a coal industry conference, when asked if the company was looking at further expansion in Australia.

Peabody, which mines in most U.S. regions, expanded into Australia, the world's largest coal exporter, by acquiring Excel Coal Ltd for about $1.3 billion in 2006.

But last month, it was spurned by Macarthur Coal (MCC.AX), whose board turned down Peabody's $3.5 billion bid.

Boyce gave no details of Peabody's plans, but did comment on Thursday's stepping down of Australian Prime Minister Kevin Rudd, who had angered the industry by proposing a 40 percent mining tax.

"It's amazing how quickly the political process unfolded in Australia," he told the McCloskey Group's Coal USA conference.

"Australia will come up with something that will allow them to capture more revenue from their resources," he said. "The question is, at what level?"

Boyce said his company was looking at expanding into Mongolia, which is rich in untapped mineral and coal resources.

Demand for coal rose 46 percent in the last decade -- faster than any other energy source, he noted. And he expects 90 percent of global coal demand growth to come from Asia.

"China, Mongolia and India are our focus," Boyce said.

Peabody has a joint venture in Mongolia. Last month the company and China's Winsway Coking Coal Holdings Ltd struck a deal to buy Polo Resources Ltd's (POL.TO) stake in the joint venture.

Boyce said Mongolia's proximity to China, with its huge demand for steel-making metallurgical, or coking, coal was the key to the investment.

"Met (metallurgical) coal is at the surface, and mining risks are low," he said. "We see Mongolia as a place we want to be."

The Peabody chief also said the company was exploring the possibility of opening a port on the West Coast of the United States or Canada for its Asian exports.

"Obviously it's a longer-term project," he said in response to a question at the conference. "Our goal is to get large volumes of PRB (western U.S. Powder River Basin) coal to the Pacific Rim. We know we can sell it in China and Korea."

The challenge, he said, was to get the needed volumes into the marketplace through a custom-built port, although there was no time frame for such a project. (Reporting by Steve James; Editing by Lisa Von Ahn)